Category: Economics

Someone Tell Republicans it is 2017, Not 1981 — and Trump Ain’t Reagan

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❝ It’s not 1981 anymore. That’s the message of an editorial in the conservative Weekly Standard, which warns Republicans not to design a tax reform patterned on the one that Ronald Reagan signed in his first year as president.

Mimicking the Reagan tax cuts is a temptation both because of Republicans’ enduring admiration for the 40th president and because his program has been the source of the economic ideas they have championed ever since his time in office.

❝ But the Standard is right that times have changed. That doesn’t mean the Gipper’s basic disposition toward lower and less onerous taxes needs to be junked. It means that today’s Republicans (and Democrats!) need to grapple with four differences between our time and his.

❝ First: The federal debt is much larger now…

❝ Second: The top individual income tax rate is a lot lower than it was in 1981…

❝ Third: The payroll tax for Social Security and Medicare has grown in importance while the income tax has shrunk…

❝ Fourth: The corporate tax rate has become a bigger problem. It has fallen since 1981…But other countries have cut their rates further.

I have my doubt if few – if any – Republicans have the economic smarts to move beyond ideology their electoral base thinks is heavenly writ. Establishment Democrats retain their backbone [or absence of same] problem.

Barnard College Replaces Manager of $286 Million Endowment — Moving to a socially responsible firm

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❝ Barnard College is replacing its money manager, Investure LLC, with another firm that’s able to invest its $286 million endowment in more socially responsible companies.

Strategic Investment Group, based in Arlington, Virginia, will become the fund’s manager at the end of September, Barnard said Wednesday in a statement. Investure, run by Alice Handy in Charlottesville, Virginia, had overseen the school’s investment office since 2006. Barnard is at least the third client to depart Investure in the past three years.

❝ In March, Barnard’s board of trustees voted to divest from energy companies that deny climate change, saying the women’s college, which is affiliated with Columbia University in New York, will “distinguish between companies based on their behavior and willingness to transition to a cleaner economy.”…

❝ In 2014, Investure lost Rockefeller Brothers Fund, which decided to divest from fossil fuel companies. Rockefeller Brothers, which has an $816 million fund, hired a unit of Perella Weinberg that customizes portfolios.

Nice to see University admins with sufficient backbone to stand up for principle and science. Anyone think Congress might follow their lead?

The Light from Coal begins to Flicker and Die in Colorado

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Valmont Power Plant — Paul Aiken/Daily Camera

❝ Xcel Energy Colorado has closed several coal plants over the past decade, usually to address air quality concerns in metro Denver. Those early closures have typically resulted in higher electricity rates for its customers.

But last week, the state’s largest utility made an economic argument for shuttering two of its coal-burning units in Pueblo a decade ahead of schedule, saying the move would address public demands for cleaner energy, significantly reduce air pollution, and lower electricity costs.

❝ Xcel Energy submitted its Colorado Energy Plan to the Colorado Public Utilities Commission, including a request to shut down two units at the Comanche Generation Station in Pueblo with a capacity of 660 megawatts.

Bids will go out to replace that generation later this year, part of a much larger request for up to 1,000 megawatts of wind, 700 megawatts of solar and 700 megawatts of natural gas generation.

“We expect the Colorado Energy Plan portfolio will come in lower than current costs. It will significantly reduce customer bills,” said Erin Overturf, chief energy counsel at Western Resource Advocates, one of 14 groups involved in working out the agreement with Xcel.

As as the cost of producing electricity becomes cheaper and cheaper, the arguments for switching away from internal combustion engines to drive private transport and commerce will die along with the ideology of fools who advocate for suffocation and stillbirth. Profits rooted in unsound technology will drive profit only for fools and those who think they need fools to govern.

AI could increase global GDP by $15.7 trillion by 2030

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❝ Much has already been made about how artificial intelligence is going to transform our lives, ranging from visions of the future in which robots make humans obsolete to utopias in which technology solves intractable problems and frees up people to pursue their passions. Consultancy firm PwC ran the numbers, and came up with a relatively rosy scenario with regards to the impact AI will have on the global economy. By 2030, global GDP could increase by 14%, or $15.7 trillion, because of AI…

❝ Almost half of these economic gains will accrue to China, where AI is projected to give the economy a 26% boost over the next 13 years—the equivalent of an extra $7 trillion in GDP. North America can expect a 14.5% increase in GDP, worth $3.7 trillion…

❝ A large part of the forecast GDP gains — $6.6 trillion—are expected to come from increased labor productivity, with businesses automating processes or using AI to assist their existing workforce. This suggests PwC believes AI will generate a productivity boost that’s bigger than previous technological breakthroughs—despite recent advancements, global productivity growth is very low and economists are puzzled about how to get out of this trap.

The rest of the projected economic growth would come from increased consumer demand for personalized and AI-enhanced products and services. The sectors that have the most to gain on this front are health care, financial services, and the auto industry.

Given appropriate political smarts, I’m in the Utopian crowd. Contemporary global economics says there’s a chance. Even in a nation silly enough to elect a fake president.

After 113 years of cranking out engines, Mercedes plant to make batteries, electric motors

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❝ The first vehicle in history considered to be an automobile was the Benz Motorwagen of 1885…It was also the first vehicle from an automaker that has been around for the duration of the industry: we know it today as Mercedes-Benz.

In other words, the company has been building cars for 132 years…

And engines for those cars have come from its the German luxury car maker’s Untertürkheim production facility for 113 years.

❝ Now, after more than a century of internal-combustion engines, that historic plant is undergoing a seismic change: it will now build batteries for electric cars as well as engines…

❝ …The Untertürkheim facility will eventually be a major supplier to the Sindelfingen passenger-car plant…There, the brand’s EQ line of electric cars will be built, for which Untertürkheim will supply the battery packs.

The luxury marque has said it will launch 10 electric cars under the EQ badge by the year 2025.

Yes, of course, the market for conventional fossil fuel-fired internal combustion engines will continue for a spell. Even with a diminishing market share it will take some years for consumers to change. Cripes, we still have enclaves of flat-earthers AROUND the globe.

Trump fiddles while China leads World Trade Recovery

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Bloomberg’s Tom Keene displays the performance of the renminbi against the U.S. dollar in 2017. He speaks with Carl Weinberg, chief economist at High Frequency Economics, on “Bloomberg Surveillance.”

Often appearing on Bloomberg TV, Dr. Weinberg is one of several economists who wastes no time on the ideological blather coming out of the Washington Beltway. Regardless of which of the two Tweedledee/Tweedledumb parties we’re allowed – is in power.

I think if you asked the average American college graduate about the Silk Road or the Silk Route – you’d get a profound silence. Listen to what Dr. Weinberg says in passing about the increase in trade this year. Understand that this is a startup barely in its beginning. Understand that regardless of Trump’s compounded ignorance and lies, the United States isn’t China’s biggest customer and consumer of goods exports. The European Union is. And they don’t consider his whines and wailing important enough to be anything more than a footnote to American electoral gullibility.

The Europeans, workers and investors alike do not suffer the disparity in income and distribution we have in the United States. Europeans get income – not fear and trembling – from global trade. Their trade with China is leading to greatly expanded trade for all the Euro nations with all the nations in between China’s hubs and the industrial centers of the European Union.

Our Fake President and China’s Codependency Trap

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❝ Seemingly at odds with the world, US President Donald Trump has once again raised the possibility of a trade conflict with China. On August 14, he instructed the US Trade Representative to commence investigating Chinese infringement of intellectual property rights. By framing this effort under Section 301 of the US Trade Act of 1974, the Trump administration could impose high and widespread tariffs on Chinese imports.

This is hardly an inconsequential development. While there may well be merit to the allegations…punitive action would have serious consequences for US businesses and consumers. Like it or not, that is an inevitable result of the deeply entrenched codependent relationship between the world’s two largest economies.

❝ In a codependent human relationship, when one party alters the terms of engagement, the other feels scorned and invariably responds in kind. The same can be expected of economies and their leaders. That means in a trade conflict, it is important to think about reciprocity – specifically, China’s response to an American action. In fact, that was precisely the point made by China’s Ministry of Commerce in its official response to Trump’s gambit. China, the ministry vowed, would “take all appropriate measures to resolutely safeguard its legitimate rights.”

❝ …Three economic consequences stand out.

First, imposing tariffs on imports of Chinese goods and services would be the functional equivalent of a tax hike on American consumers…

Second, trade actions against China could lead to higher US interest rates…

Third, with growth in US domestic demand still depressed, American companies need to rely more on external demand. Yet the Trump administration seems all but oblivious to this component of the growth calculus…

Stephen Roach is the United States’ leading economic expert on China Trade – IMHO. His decades of experience in place on behalf of Morgan Stanley, his research and analysis over time are with few peers. His knowledge of the topic towers over the twerp who is our fake president and most of his second or third tier pimps-as-advisors.

RTFA for the details of this outline.

139 countries could be 100% powered by wind, water, and solar energy by 2050

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❝ The latest roadmap to a 100% renewable energy future from Stanford’s Mark Z. Jacobson and 26 colleagues is the most specific global vision yet, outlining infrastructure changes that 139 countries can make to be entirely powered by wind, water, and sunlight by 2050 after electrification of all energy sectors.

Such a transition could mean less worldwide energy consumption due to the efficiency of clean, renewable electricity; a net increase of over 24 million long-term jobs; an annual decrease in 4-7 million air pollution deaths per year; stabilization of energy prices; and annual savings of over $20 trillion in health and climate costs…

❝ The challenge…is one of the greatest of our time. The roadmaps developed by Jacobson’s group provide one possible endpoint. For each of the 139 nations, they assess the raw renewable energy resources available to each country, the number of wind, water, and solar energy generators needed to be 80% renewable by 2030 and 100% by 2050, how much land and rooftop area these power sources would require (only around 1% of total available, with most of this open space between wind turbines that can be used for multiple purposes), and how this approach would reduce energy demand and cost compared with a business-as-usual scenario…

❝ …Jacobson says that the overall cost to society (the energy, health, and climate cost) of the proposed system is one-fourth of that of the current fossil fuel system. In terms of upfront costs, most of these would be needed in any case to replace existing energy, and the rest is an investment that far more than pays itself off over time by nearly eliminating health and climate costs.

RTFA for a clear exposition. There’s a link available to the original paper published in JOULE. Much heavier reading. A necessity for real scientific analysis and review.

This Robot Can Sew 1.2 Million T-Shirts a Year

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❝ In a soon-to-open Arkansas factory, 21 production lines manned by the Sewbot will be capable of making 1.2 million T-shirts a year–and the ripple effects will soon be felt in garment factories in the developing world.

Once the system is fully operational, each of the 21 production lines in the factory will be capable of making 1.2 million T-shirts a year, at a total cost of production that can compete in terms of cost with apparel companies that manufacture and ship clothing from the lowest-wage countries in the world. The factory will be one of the first to use a technology that could herald immense changes in how the apparel industry works.

❝ …Sewbot–SoftWear Automation’s clothes-making robot–was developed at Georgia Tech’s Advanced Technology Development Center in a process that began a decade ago. In 2012, researchers got a grant from the Defense Department’s tech innovation wing DARPA to develop the concept and formed a company to commercialize the technology. By 2015, the company was selling a more basic version of the robot that could make bath mats and towels. The newest version, to be deployed in the Little Rock factory, can make T-shirts and partially sew jeans.

All the questions relevant to automation count in this instance – even in low wage countries like Bangledesh. Before anyone decides to sneer at the fate of workers made redundant in Bangladesh, don’t kid yourselves by thinking American politicians, American corporations are any more advanced and humanist than in South Asia.